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I have a friend who lives a development of McMansions nestled in New Jersey's Pine Barrens, and whenever I visited him, I would wonder who could afford those houses. The answer is that, mostly, they couldn't.

When times were good, throngs of people snatched up these homes, which sit on more than an acre of property, using exotic interest-only mortgages. As the real estate market collapsed, so did their ability to afford their houses. My friend's next-door neighbor left in the middle of the night ahead of a bank repossession. Another family recently vacated their home under the watchful eye of the county sheriff. For-sale signs abound in the neighborhood, including one from the builder advertising a property that is available for immediate occupancy: That sign has been up for months.

"This leveling of the foreclosure trend is not necessarily evidence that fewer homeowners are in distress and at risk for foreclosure, but rather that foreclosure prevention programs, legislation and other processing delays are in effect capping monthly foreclosure activity -- albeit at a historically high level that will likely continue for an extended period, " said James J. Saccacio, chief executive officer of RealtyTrac, in a press release.

Indeed, the data shows that default rates on modified loans remain high because unemployment hovers around 10%. Standard & Poors recently estimated that the redefault rates on modified loans were likely to hit an astonishing 70%. Activists have argued for years that the best way to help cash-strapped homeowners is to allow bankruptcy court judges to slash the value of mortgage loans, an idea that the banking industry has opposed for just as long. But the recent data suggests that the government's Home Affordable Modification Program "may simply have delayed the inevitable," says the S&P report.

Much of the discussion about real estate these days resolves on whether people were greedy or stupid when they took on these loans. There isn't much sympathy out there for people like my friend's New Jersey neighbors who bought homes that they couldn't really afford even before the market tanked. But what is forgotten in the whole "greed versus stupidity" debate is that it takes two parties to conduct a transaction. Many mortgage companies chased short-term profits by talking people into risky, exotic mortgages instead of plain-vanilla 30-year fixed-rate loans. Victims of these sleazy practices deserve our help, not our scorn.

The market will correct itself eventually. But many dream homes are still nightmares for their owners. I don't see the fortunes of the New Jersey McMansion owners improving significantly any time soon.